The condominium lifestyle is very attractive to many home buyers. The main difference between buying a condominium and a single-family home is the type of ownership you receive. With a condominium you get the exclusive right to the interior space of your dwelling unit, but the land, walls, grounds, fences and facilities are owned in common with the other owners in the complex. With a single-family home you are the sole owner of the building and the land it sets on. This is called "fee simple" ownership.
A condominium is usually attached to other similar units by a common wall, while a house is detached. However, a recent trend is to develop detached condominiums, where the land and improvements are owned in common. There are also some attached houses where the land is individually owned. These neighborhoods are called Planned Unit Developments (PUD.)
Condominium owners usually can't remodel at will, while single-family house owners are relatively free to make changes to suit their personal needs and tastes. Condominiums are governed by CC&Rs (Covenants, Conditions & Restrictions), which dictate owners' rights and restrictions on those rights. For example, the CC&Rs may prohibit you from changing the exterior color of your without approval. Many single-family housing neighborhoods also have CC&Rs, although they tend to be less restrictive.
When buying a condominium you should include a contingency to review and approve the CC&Rs, the articles of incorporation, the bylaws and the rules and regulations of the condominium association. It's also a good idea to review the minutes of six to 12 months of board meetings to understand the current issues that are being discussed. Look over the financial documents such as the budget, reserve study and any assessments and find out how many of the units are non-owner occupied. This may affect your ability to get a loan. Finally, you'll want to know if the association is involved in any litigation. The seller, real estate agent or escrow company will order these documents from the management company for you to examine and approve.
Condominium documents are long and complex, and buyers often complain that they don't understand them. If you can't make sense of the documents, contact a homeowner association board member for an explanation. Or, hire a real estate attorney who is knowledgeable in condominiums to review the documentation and give you an outline of the important points.
Maintenance of the condominium complex is shared with the other owners. When you buy a condominium, you become a member of the homeowners' association. You pay a monthly fee, which covers management of the association, hazard insurance and routine maintenance. A portion of your fee goes into a reserve account for future maintenance and replacement of the improvements. Sometimes utilities, such as water, garbage and sewer are included in the monthly fee. Exactly what's covered by the homeowner fees varies from complex to complex. The responsibility for maintenance of a single-family house usually lies solely with the owner.MORE HINTS: No matter what kind of residence you are buying, single-family home or condominium, the property should be thoroughly inspected by a licensed contractor or professional home inspector as a contingency of the purchase. Also, insist on a complete termite inspection and be sure to carefully check out the neighborhood.
Read and understand the CC&Rs and other documents before you buy a condominium. If you're a dog lover and the CC&Rs prohibit dogs, you'll want to know this before you buy, not after.
Just as the value of any one house is dependent on property values in the neighborhood, the value of a condominium depends on the condition and desirability of the entire complex. The best way to get information about a condominium complex is the same as in a single-family house neighborhood. Take a walk and talk with the neighbors.
Condominiums tend to be less expensive than single-family houses in the same area. They usually offer more amenities but have higher monthly fees. Condominiums are a good choice for busy professionals or retirees, who want to be in a good location, but do not want to pay the higher price for a single-family house.
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Saturday, September 14, 2013
How is buying a condominium different than buying a house?
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